How Much Does Donald Trump Pay in Taxes? It Could Be Zero (THANKS TO RE TAX LOOPHOLES)

That's because Mr. Trump, as a prominent and active developer, can take advantage of some of the most generous tax breaks in the federal tax code to reduce his reported income to near zero, or even report a loss.

Few tax advisers to major real estate developers would speak for attribution, because their clients benefit from the same tax breaks available to Mr. Trump. But all told me they knew developers in Mr. Trump's league who pay little or no income tax despite hundreds of millions in cash flow.

"Real estate is notorious for throwing off huge deductions," Mr. Rosenthal said. "That coupled with wide latitude in the timing and recognition of income make real estate development extremely attractive from a tax standpoint."

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L.L.C.s pass on income tax-free (and, equally important, losses) to their owners. Real estate L.L.C.s can generate enormous losses, even with millions in revenue, because of depreciation, interest payments, real estate taxes and operating costs. Mr. Trump can use paper losses to offset taxable income, such as interest, dividends, royalties and employment income.

That's a loophole that was eliminated for most investors in the landmark tax reform legislation in 1986. But because of aggressive lobbying by the powerful real estate industry, so-called active developers like Mr. Trump were exempted from restrictions on using such paper losses to offset ordinary income.

The tax value of Mr. Trump's paper losses may well exceed his investment in the underlying properties, because he and other developers typically make minimal down payments and use as much debt as possible to finance a purchase. To take just one example, Mr. Trump bought what is now the Trump National Doral Miami resort and golf club for $150 million while it was in bankruptcy proceedings and financed the purchase with $125 million in loans from Deutsche Bank.

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At least interest is a cash payment. Depreciation is a noncash charge, and is largely an accounting conceit that benefits real estate investors. The theory is that real estate loses value over time and is eventually worthless. As everyone surely knows, most real estate has historically appreciated in value.

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Depreciation is ordinarily recaptured and taxed when an asset is sold. But Mr. Trump and other developers can benefit from provisions that make that unlikely. If they sell appreciated properties at a large profit but use the proceeds to buy other real estate, the transactions may be considered a "like-kind" exchange. If so, there's no tax on the gain.

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"It's a big loophole," Mr. Rosenthal said of the like-kind exchange provisions. "It allows well-to-do and well-advised taxpayers to defer their tax liability potentially until death."